Impact Measurement
Introduction
There has never been a better time to run an impact-oriented startup. Impact-oriented tech companies raised £2 billion in investment in 2021, and recent studies have highlighted that 82% of consumers choose brands that stand for a greater purpose. Yet, as impact startups join the mainstream, people are increasingly asking whether companies are delivering on their commitments. As founders, how can you measure, manage, and demonstrate your impact in a credible way? And more importantly, what is the value in doing so beyond credibility? This guide is for you if you want to dive deeper into your impact and find practical ways to leverage it to your business’s advantage. Whether you are planning what to measure for the first time or are a seasoned founder looking to improve how you communicate your impact or raise impact investment, this guide is for you.
Before we begin
Why should you manage and measure impact?
Concrete Benefits of Impact Management
Before embarking on the journey of impact evaluation,
here are some useful guiding questions you should ask yourself:
Useful questions you should ask before embarking on the journey of impact evaluation
Let's start
First, determine your level of impact using the ABC framework:
Are you actively avoiding harm to people’s well-being or the condition of the natural environment?
No
You should consider minimizing your harm and seeking ways to improve.
An ESG strategy would be a good place to start
Yes
Are you benefiting your stakeholders (employees, customers, suppliers, or the environment)?
No
Your level of Impact is A
You can improve by creating an ESG strategy.
Yes
Does your product or service directly contribute to solutions of global challenges such as equality, well-being or environmental sustainability?
No
Yes
Your level of Impact is A
You can improve by creating an ESG strategy.
Your level of Impact is C
You should consider both an ESG and Impact strategy
About The ABC framework Act to avoid harm - At a minimum, enterprises can Act to avoid harm by identifying where the organisation is causing harm to people’s well-being or the condition of the natural environment and act to minimize or eliminate that harm. For example: A clothing company that historically paid employees at or below minimum wage and had instances of human rights abuse in its supply chain. Its operations were inefficient and carbon intensive versus peers. Two years ago, the company made a commitment to clean up its act. Since then, the company has reported meaningful increases in workforce salary and it is on its way to becoming a living wage employer. Management has taken responsibility for eradicating human rights abuses across all business relationships. This initiative is not yet complete but there has been a marked improvement year-on-year. The company has set targets to reduce its carbon emissions and has made substantial investments in new carbon efficient technologies across its manufacturing plants. Benefit stakeholder - In addition to acting to avoid harm, enterprises can actively benefit stakeholders by improving well-being for one or more group of people and/or the condition of the natural environment For example: A carpet manufacturer that produces carpet tiles through use of environmentally friendly materials and production methods. Through various initiatives, the company has achieved net-zero carbon emissions across its operations. It is celebrated as a leading employer in terms of workforce diversity and well-being. It is the buyer and seller of choice in its industry because of its fair practices. Contribute to solutions - In addition to A and B, level C requires that the organisation product or service directly addresses a global challenge and positively contributes to people's well being or the natural environment. For example: A tech company develops a new technology improving waste management in rural areas, providing quality employment opportunities to people from unprivileged background.
Now that we know our level of Impact, What strategy should we use?
If your product or service has a direct positive impact and addresses an important social or environmental problem (level c), you should have both an ESG and IMM strategy.
If your product is rather neutral, but you benefit stakeholders (Level B) or if your product is controversial (Level A), you should probably start with an ESG framework to minimize risk and increase your positive impact and wait with an IMM framework.
What is
ESG
What is
IMM
ACT TO AVOID HARM
ACT TO AVOID HARM
At a minimum, enterprises can Act to avoid harm by identifying where the enterprise is causing harm to people’s well-being or the condition of the natural environment and act to minimize or eliminate that harm
Example:
A clothing enterprise paid employees below minimum wage. Its operations were inefficient and carbon intensive versus peers. Two years ago, the enterprise made a commitment to clean up its act. Since then, the enterprise has reported meaningful increases in workforce salary. It has also set targets to reduce its carbon emissions by 70% until 2030.
BENEFIT STAKEHOLDERS
BENEFIT STAKEHOLDERS
In addition to acting to avoid harm, enterprises can actively benefit stakeholders by improving well-being for one or more group of people and/or the condition of the natural environment
Example:
A carpet manufacturer that produces carpet tiles through use of environmentally friendly materials and production methods. Through various initiatives, the entreprise has achieved net-zero carbon emissions across its operations. It is celebrated as a leading employer in terms of workforce diversity and well-being, setting a target of 50:50 gender ratio in all levels of management, by 2025.
CONTRIBUTE TO SOLUTION
In addition to A and B, level C requires that the enterprise product or service directly addresses a global challenge and positively contributes to people's well-being or the natural environment
CONTRIBUTE TO SOLUTION
Example:
A marine biologist troubled by the degradation of coastal reef established a biotech entreprise that develops new types of plastic consuming algae to reduce amount of free floating plastic by 75% within 10 years.
ACT TO AVOID HARM
ACT TO AVOID HARM
At a minimum, enterprises can Act to avoid harm by identifying where the organisation is causing harm to people’s well-being or the condition of the natural environment and improving those outcomes.
BENEFIT STAKEHOLDERS
BENEFIT STAKEHOLDERS
In addition to acting to avoid harm, enterprises can actively benefit stakeholders by not only acting to avoid harm for all stakeholders (A), but also maintaining or causing improved well-being for one or more group of people and/or the condition of the natural environment
CONTRIBUTE TO SOLUTION
Many enterprises can go further by not only acting to avoid harm for all stakeholders (A), but also improving the well-being of a group of people or the condition of the natural environment so that the outcome is within the sustainable range, where the outcome had been unsustainable prior to engaging with the organization through no fault of the organization itself. These unsustainable outcomes might have been the result of market or policy failure, leaving a group of people without access to something they need for their well-being or putting the availability of natural resources at risk.
CONTRIBUTE TO SOLUTION
Examples
A clothing company that historically paid employees at or below minimum wage and had instances of human rights abuse in its supply chain. Its operations were inefficient and carbon intensive versus peers. Two years ago, the company made a commitment to clean up its act. Since then, the company has reported meaningful increases in workforce salary and it is on its way to becoming a living wage employer. Management has taken responsibility for eradicating human rights abuses across all business relationships. This initiative is not yet complete but there has been a marked improvement year-on-year. The company has set targets to reduce its carbon emissions and has made substantial investments in new carbon efficient technologies across its manufacturing plants.
A and B startups are in good positions to construct an ESG strategy,
while a C startup can ALSO develop a full IMM framework
Let’s analyse which kind of a startup you are? A, B or C?
Read more about the classification of organisations according to the ABC framework
E
Environmental criteria are used to evaluate how a company performs on natural environmental issues. For instance, using energy efficiently and managing waste responsibly.
Environment
E
S
Social criteria examine how a company manages relationships with employees, suppliers, customers and the communities where it operates. For instance, diversity and inclusion policies and healthy working conditions.
Social
S
G
Governance criteria are used to evaluate what the organisation is doing to stay ahead of corruption and ensure its investments remain sustainable in the future. It deals with leadership, executive pay, audits, internal control and shareholder rights.
Governance
G
The fundamentals characteristics
Is your entreprise actively avoiding harm to people’s well-being or the condition of the natural environment?
No
It’s 2024 your should reconsider your strategy!
Yes
Are you actively improving the well-being of stakeholders such as customers, employees or suppliers or improving the condition of the natural environment?
No
Your level of Impact is
A
Avoid harm
Yes
Does your product or service directly contribute to solutions of global challenges such as equality, wellbeing or environmental sustainability?
We recommend
ESG
No
Yes
Your level of Impact is
B
Benefit Stakeholders
Your level of Impact is
C
Contribute to solutions
We recommend both
ESG & Impact strategies